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Monday, June 30, 2014

Allahabad HC Orders IRDA To Scrutinise Policies Of SBI Life Insurance

The Allahabad high court, one of the first high courts
to be established in India, has directed the Insurance Regulatory and
Development Authority (IRDA) to scrutinise each and every policy sold by
private sector SBI Life Insurance Company Limited. The court also asked the
regulator to discontinue its policies and wind up its business if it detects
any regulatory breaches.

The honourable high court pronounced this order hearing a petition filed by one
72-years old Virendra Pal Kapoor, who claimed he had invested Rs. 50,000 in
year 2007 in SBI Life's Unit Plus II-Single, a unit-linked plan (ULIP) with an
option of limited term of 5-years, on the basic sum assured for life at Rs.
3,12,500 (approximately 6-times of the investment), with a choice of investment
in a growth fund. But on maturity, the insurer paid merely Rs. 248 to Mr.
Kapoor.

The policy was sold to Mr. Kapoor by an agent on behalf of SBI Life Insurance
Company on the basis of certain terms that didn't have necessary regulatory
approval.

While the court found that the policy was sold to Kapoor in the premises of SBI
Life, and was allegedly misled by an agent in breach of IRDA's norms, the court
held an alongside inspection of SBI's directors (who are part of SBI Life's
board) necessary to find out if any unlawful gain had been made from sale of
such policies.

“The central government will do well to ensure that the investors are not
cheated in a manner, as in the present case, in which the entire investment of
the senior citizen has been lost on the pretext of the policy being in tune
with Irda guidelines", the court said.

SBI Life Insurance is a joint venture between State Bank of India (SBI),
country's leading public sector bank and BNP Paribas Cardif, the insurance arm
of BNP Paribas of France. SBI holds 74% stake and BNP Paribas Cardif the
remaining 26% in the JV.